India’s inflation slows from 14-month high, raising hopes of interest rate cut under new governor

India’s inflation slows from 14-month high, raising hopes of interest rate cut under new governor


A laborer loads consumer goods onto a supply cart at a wholesale market in Kolkata, India, on November 11, 2024.

Nurphoto | Nurphoto | Getty Images

India’s headline inflation softened from 14-month highs, coming in at 5.48% in November.

The print was down from the 6.21% in October and was below the 5.53% expected by economists polled by Reuters.

It also comes after the RBI held rates at 6.5% during its latest monetary policy meeting last week, despite a surprise slowdown in economic growth. India’s economy expanded by just 5.4% in its second fiscal quarter ending September, well below estimates by economists and close to a two-year low.

While the Reserve Bank of India does not produce monthly inflation estimates, the RBI projected the headline print will hit 5.7% during the country’s third fiscal quarter ending in December. The central bank predicts inflation will reach 4.8% across the full fiscal year, which runs to March 2025.

Moving forward, the RBI said that food inflation is likely to soften in its fiscal fourth quarter, given the seasonal easing of vegetable prices and autumn harvest arrivals. Good soil moisture conditions, along with comfortable reservoir levels, also bode well for the production of winter crops.

Agriculture is a key component of India’s GDP, and food prices also play a key part in the country’s inflation readings, measured against a separate metric known as the consumer food price index.

The RBI has previously cautioned that adverse weather events and the rise in international agricultural commodity prices pose upside risks to food inflation. “Businesses expect pressures from input costs to remain elevated and growth in selling prices to accelerate from Q4,” it noted on Dec. 6.

A new monetary policy stance?

The inflation reading comes days after India named a new central bank governor, appointing Sanjay Malhotra to replace long-standing chief Shaktikanta Das in a move that some market watchers say strengthens the outlook for rate cuts early next year. 

Das had been widely considered the most hawkish member of the RBI’s Monetary Policy Committee, and his departure could influence the board’s overall stance, said Shilan Shah, deputy chief emerging markets economist at Capital Economics in a note on Monday.

“The appointment of Mr Malhotra could set a new direction for the RBI,” Shah added. 

Should inflation come down sustainably, the RBI will then have room to lower rates in an attempt to spur economic growth, after a slowdown for three straight quarters year-on-year.

Economists at Capital Economics are now expecting a 25-basis-point cut in India’s repo rate during either Malhotra’s first MPC meeting in February, or at an unscheduled gathering ahead of that. The group had previously predicted a rate cut would take place in April under Das’ leadership.

Economists at Citi meanwhile held to their view for a February cut.

— CNBC’s Dylan Butts contributed to this story.



Source

Trump’s 100% movie tariff threat risks dealing a heavy blow to Britain’s already struggling film industry
World

Trump’s 100% movie tariff threat risks dealing a heavy blow to Britain’s already struggling film industry

U.S. President Donald Trump’s renewed threat to impose a 100% tariff on all movies produced outside of the country could upend the global industry — and deliver a heavy blow to Britain’s already fragile sector. The White House leader first announced duties on movies produced outside the U.S. in May this year. He than reiterated […]

Read More
Coalition deal puts Takaichi on brink of Japan’s first female premiership
World

Coalition deal puts Takaichi on brink of Japan’s first female premiership

Sanae Takaichi, Japan’s economic security minister, speaks during a news conference in Tokyo, Japan, on Monday, Sept. 9, 2024.  Toru Hanai | Bloomberg | Getty Images Hardline conservative Sanae Takaichi is almost certain to become Japan’s first female prime minister on Tuesday, after the right-wing opposition Japan Innovation Party, known as Ishin, said it was ready to back her premiership. […]

Read More
Asia-Pacific markets rise as investors look toward slate of China economic data
World

Asia-Pacific markets rise as investors look toward slate of China economic data

Beijing Central Business District, mix of offices and apartments Ispyfriend | E+ | Getty Images Asia-Pacific markets opened higher Monday as investors awaited a slew of economic data coming out of China. Analysts polled by Reuters expect China’s economy to have slowed in the third quarter, forecasting gross domestic product to have grown 4.8% in […]

Read More